Consumer Products

Procter & Gamble Sheds Specialty Beauty Business

Trey Thoelcke

On Monday, Procter & Gamble Co. (NYSE: PG) announced that it had transferred its specialty beauty business to Coty Inc. (NYSE: COTY) in a Reverse Morris Trust transaction. Assets transferred include its global fine fragrances, salon professional, cosmetics and retail hair color businesses, as well as select hair styling brands.

Procter & Gamble Chairman, President and Chief Executive Officer David S. Taylor said:

The completion of this transaction is a key step in our journey to return P&G results to a balance of strong top-line growth, bottom-line growth and cash generation. This effectively completes the major work we undertook two years ago to streamline and strengthen our product portfolio. We are now focused on 10 product categories and about 65 brands where P&G has leading market positions and where product technologies deliver performance differences that matter most to consumers.

As part of the transaction, the company retired 105.0 million shares of its stock. At the closing share price on Friday, September 30, of $89.75, that was worth some $9.4 billion.

Many on Wall Street feel that the new focus on a slimmed down product portfolio will help spur earnings growth and return the company to its long-time premium consumer staples multiple. Some analyst estimates for the next two years are 2% above current Wall Street expectations, and the company posted solid earnings in the most recent quarter.

In addition, 24/7 Wall St. recently noted that Procter & Gamble remains one of the Dividend Aristocrats; that is, S&P 500 companies with a history of raising their dividends for 25 years or more. The company most recently hiked its dividend in April 2016, which marked the 60th consecutive year that the consumer products giant had increased its dividend. The company actually has been paying a dividend for 126 consecutive years, since its incorporation in 1890.

Also note that the number of Procter & Gamble shares short surged about 186% in early September, though that was not quite enough to lift it into the top 10 most shorted stocks traded on the New York Stock Exchange. The 81.26 million shares short as of the most recent settlement date represented 3.1% of the total float.

As mentioned, Procter & Gamble shares closed most recently at $89.75. The dividend yield is 2.9% and the market cap is nearly $240 billion. The stock has a consensus price target of about $93 and a 52-week range of $72.50 to $90.22. Investors might want to take note that this high is an all-time high.